CommonDreams.org republished an article on Social Business by Dr. Muhammad Yunus

June 26, 2008

How Social Business Can Create a World Without Poverty

by Muhammad Yunus

Bill Gates caused a stir in Davos last month with his call for “creative capitalism.” He pointed out that while capitalism is “responsible for the great innovations that have improved the lives of billions … to harness this power so it benefits everyone, we need to refine the system.”

I see traditional capitalism as a half-developed structure. It ignores the humanity within all of us.

Moneymaking is an important part of humanity, but it is not the only part. Caring, concern, sharing, empathy – all of these aspects also must be considered when developing an economic framework that takes the whole person into account.

Enter the missing piece of the global development puzzle: social business.

Social business – not a charity

A social business is not a charity. It is a nonloss, nondividend company with a social objective. It aims to maximize the positive impact on society while earning enough to cover its costs, and, if possible, generate a surplus to help the business grow. The owner never intends to take any profit for himself.

As evidenced every day by religious ministers and practitioners, social activists, and philanthropists, making money is not always the only driving force. They may be a special group of people who makes it visible, but the desire to help others exists in various degrees in every human being.

Capitalism’s limits

Traditional capitalism doesn’t tap into that universal desire. Capitalism delivers limited results because it takes too narrow a view of human nature, assuming people are one-dimensional, concerned only with maximizing profits.

Capitalism has long been a source of prosperity, spurring industrial, technological, and social progress in North America and Western Europe. But even as standards of living rise, large numbers of people are still left behind.

While free markets have ushered in many benefits, these gains have bypassed too many of the world’s people, especially the poor.

And yet, in recent decades, powerful tools have been developed that leverage capitalism’s strengths to enrich the lives of those who get left behind.

Take microcredit. It has been a powerful tool in combating poverty, enabling the poorest of the poor to change their lives and provide for their families. Through these small, collateral-free loans with a nearly 100 percent return rate, borrowers – mostly women – have been able to harness entrepreneurial abilities inherent in them.

Microcredit is just one example of how a business approach can help alleviate poverty when we move beyond the idea that business by definition has to mean making financial profit for the owner.

We need social businesses to couple the human heart to the capitalist system. This is a sure way of meeting needs that either remain unmet or are met extremely inadequately through the efforts of philanthropy, charity, or welfare.

Traditional philanthropy and nonprofits generate a social gain, but they do not design their programs as self-sustaining business models. A charitable dollar can be used only once. A dollar invested in a self-sustaining social business is recycled endlessly.

A social business is designed to be both self-sustaining and to maximize social returns like patients treated, houses built, or health insurance extended to people who never had this coverage. An investor in a social business retains an ownership interest to hold management accountable and to get the investment back over time, but no dividends are expected, and any profits should be reinvested in the business or used to start new similar businesses.

Social businesses could be viewed akin to investment accounts, where the money is returned over time but the interest is paid in social dividends, rather than in economic profit.

Bottom line: effect on society

While both personal entrepreneurship and social businesses need to be profitable, the bottom line for a social business is how much impact it makes on society,not how much money it returns to the investors. This represents an opportunity for the extension of capitalism to meet the social needs that are not currently met.

As an investor in a social business, I expect my investment money to come back to me, but the real reason for my investment is to see that it benefits society, as opposed to my pocketbook.

A profit-maximizing business owned by the poor can be considered a social business. The Grameen Bank is an example of a social business that is both owned by its poor borrowers and that seeks to maximize the benefits for those borrowers.

Another well-known example of social business is Grameen Danone Foods (known as Dannon in the US). It was inaugurated in 2006 as a partnership between Grameen Bank and Groupe Danone of France.

Groupe Danone produces and distributes Danone yogurt and Evian bottled water throughout the world. The mission of Grameen Danone Foods is to manufacture nutrient-rich, fortified yogurt in small local plants that minimize the need for expensive refrigeration and to sell it at a low price to improve the diets of rural children in Bangladesh.

By investing in this joint venture with Grameen Group, Groupe Danone can help to eradicate malnutrition in Bangladesh, one of the least developed countries in the world, by doing business, not by simply donating the money.

The experiment is a win-win situation and the first of many multinational social businesses that Grameen would like to partner.

The current capitalist framework does not allow us to fully mobilize mankind’s will to do good.

Tap into the urge to do good

Because we are creatures who are motivated to solve the problems of the world, we need to add a new component. Capitalism has the capacity to do good in the world, provided we recognize that the motivation for the entrepreneur need not be exclusively economic and personal.

The urge to do good exists in all of us – right along with self-interest. We can harness that urge to do good in addition to human ingenuity to help the world’s poor become self-sustaining with dignity and self-respect.

Thirty-one years ago, when I launched the Grameen microcredit program, no one in the banking world thought low-cost loans for poor people would be viable on a large scale. I was not sure myself how large it could grow.

Just as microcredit has proved to be a success, so, too, can social business. Working together, we can expand the predominant view of capitalism and enterprise to include social business.

This new perspective will move us one step closer to bringing all people into prosperity, and one step closer to a world without poverty.

21 Comments so far

alexnosal February 15th, 2008 12:05 pm

Unlike Bangladesh though, America is controlled by corporations that have no compassion or empathy for the general public. Here in America we have ‘macrocredit’ which is responsible for the sub-prime mortgage crisis and massive credit card debt. Small businesses are discouraged in America as people are directed towards franchises, dealerships and other corporate connected methods of business. Our tax dollars are diverted from any ’social business’ needs of average Americans and instead the public funds are poured into the military industrial complex supposedly to protect us from imminent danger from a handful of obscure Middle Eastern groups. I’m sorry Mr. Yunus but your methods have to many obstacles in corporate America.

vinlander February 15th, 2008 1:20 pm

I tip my hat to Dr. Yunus and the excellent work the Grameen Bank has done.

What struck me in this piece, though, was one simple sentence, “The owner never intends to take any profit for himself.” That, sadly, needs to be taught at a fairly early age, and in the US, at least, is never taught at all.

fpal February 15th, 2008 2:20 pm

An idea whose time has come.

For too long American capitalism has privatized profit and socialized costs.

A social business is a self-sustaining, socially responsible model.

kropotkins ghost February 15th, 2008 2:43 pm

I don’t agree, in his model there are still owners and investors. If the point is to have a socialy benificial system then why would we still need owners and monetary gatekeepers. Would it not be better for the workers to own the company, factory or whatever it may be. Then that cuts out the useless middle men. If the people as a community owned the methods of production then all would reap the benefits. This is only a quarter measure at best that still would requre a class society to be in place. This is also no better than state socialism and would still stratify the people and divide the wealth unequaly. Capitalism was a progressive force only to bring us out of feudalism but it still relies on a class system to function and combined with the power of the state…well look out your window and you can see for yourself the result. This guy only got a Nobel prize for this crap because it is a pipe dream and worthless. His concept still keeps the powers that be safe because it requires they themselves to make the change! Only we the people can and must make the changes for a more humane society, reformed capitalism will not do it.
It would be better to get rid of government and capitalism all together. We would then be trully free to live as human beings and live in true communities. Communities that would work together so that each person can aspire to be who they trully were ment to be. This is not a utopian idea because it will take a lot of effort and working together to make it happen, it is possible. You Progressives are so close. Anarchism, wiki it.

Any economic system with a real sense of humanity works. Any economic system that lacks a real sense of humanity will eventually fail. Actually, it’s the type of people in an economic system that matters. The economic system itself is of no consequence.

Saying that the only purpose of business is to make money is like saying that the only purpose of living is to eat food.

We are trapped in a system that requires us to destroy ourselves in order to make a living.

The market is a good tool, but a bad value system and a worse religion.

rtdrury February 15th, 2008 6:03 pm

Corporations have been “doing good” for a long time. It goes in cycles, like this: Journalists find problems, publicize them and inspire public concern, corporations react with pretend/token solutions, publicize them and relax public concerns, destruction intensifies, cycle repeats.

The capitalist “public relations” machine cultivates a societal convention where people are taught to not think. The capitalist wants the people to be doing, not thinking. In such a dumbed down state, the people readily accept the purist profit motive, the delusion of disconnect between that and the problems it creates, and the token charity to help mitigate the problems. Never mind that the “father of capitalism” Adam Smith and his many peers completely rejected such a scenario, along with the vast majority of regular people who are aware of reality.

The real solution to all man-made disasters is to “crush … the aristocracy of our moneyed corporations…” and “enlighten the people, generally…”

rtdrury February 15th, 2008 6:16 pm

kropotkins: Would it not be better for the workers to own the company, factory or whatever it may be.

Of course it’s better for the workers to own. You got self-determination? You got political independence? You got responsibility? Not until you are a free agent. Not until you are emancipated from wage slavery.

This is why we are bringing back the craftsman guilds and the cottage industries. We’re building networks, databases and processes to make these more functional and efficient. We’re working on it, with localism, we’re overtaking monopoly capitalism.

Years ago, businesspeople – culturally – had a notion of a “fair profit”. I think it was 10% of turnover. The idea of maximising profit was labeled “charging what the market will bear” and was seen as despicable.

These days, that very practise is seen as morally virtuous, as the market is seen as some sort of omniscient God and so squeezing every last drop of profit is simply doing the will of God.

It’s cultural.

dlnelson7 February 16th, 2008 9:31 am

CO-ops exist in the US…credit unions are co-ops. Check out www.ica.coop to learn which 300 coops are billion dollar businesses.

Try and do business with a coop.

Doom n Gloom February 16th, 2008 10:04 am

Americans have constructed their economic prison by their ignorance and inaction. Thoughtful people like Yunus have proven that creative changes with far-reaching positive consequences can happen from the bottom. Whether creativity or invention is used to formulate and apply new social businesses, their creation would add a needed dimension to the new vision that is being formulated, at the bottom, by people now. It is interesting to think about.

Mr. Yunis preaches a great idea, but has yet to come up against the neo-Robber Barons who run corporate America. They like the way things are going (a great lurch backwards towards the era before the Sherman Anti-Trust Acts). Expect the corporate media mouthpieces to poo-poo his approach if it ever appears to be viable beyond the Third World and starts to encroach on their turf.

sjc_1 February 17th, 2008 6:54 pm

One of my old phrases is that capitalism can succeed if capital is available. The lending experiment that was done lent very small sums to vary many people. If a person did not pay it back, they were done. If a person did pay it back, it did not mean that they would be lent much more. It is seed capital.

ticonderoga February 17th, 2008 9:32 pm

It doesn’t even have to be as extreme an example as an owner of a company not wanting to make any profit for himself for capitalism to redeem itself. All it has to do in order to do this is for the owner to be satisfied with a reasonable profit — AND to be concerned with the quality of whatever it is he or she produces, along with fair treatment toward the people who actually make whatever is produced.

And to see to it that some things don’t have a market value at all, like clean water and air, and health care. Of course that would be teetering toward socialism, and anything that looks like it might be doing that is a very bad thing. Just ask George Bush.

ike kay February 18th, 2008 9:32 pm

To: Dr. Yunus,

Your idea is grand and the truth of your words are echoed in the work I am doing with microfinance in my film. I hope to extend it to your work if this message reaches you. I interviewed Alex Counts at the Grameen foundation in Washington but somehow I did not get from that interview he shared the thinking that is present here.

Propaganda translated:
How some bunch of words about social business can buy some time to build robot attack jets and equip space lasers with nuclear power…

rocyahsoul February 19th, 2008 4:38 am

To: Kropotkins

I do you one better, eliminate finance, measure human toil in calories, each product is only worth it’s human toil calories. Divide all material evenly.

rocyahsoul February 19th, 2008 4:39 am

Mo Ha Mad You Nuts

rocyahsoul February 19th, 2008 4:39 am

More laughing angry, you’re nuts.

thinking4me February 20th, 2008 5:17 pm

Microcrdit is a blessing in disguise… the system still produces INFLATION in the long run.

More over: the money still comes from central banks, only bodies able to issue money and since every banknote in the world is backed by a promise to pay OR IOUs … we can say… “The borrower is the slave to the lender.” — King Solomon

One Response to “CommonDreams.org republished an article on Social Business by Dr. Muhammad Yunus”

[…] We buy, sell, rent and lease new and used IBM Midrange and Mainframe hardware, plus Sun Servers and … wrote an interesting post today onHere’s a quick excerpt Published on Friday, February 15, 2008 by the Christian Science Monitor How Social Business Can Create a World Without Poverty by Muhammad Yunus Bill Gates caused a stir in Davos last month with his call for “creative capitalism.” He pointed out that while capitalism is “responsible for the great innovations that have improved the lives of billions … to harness this power so it benefits everyone, we need to refine the system.” I see traditional capitalism as a half-developed structure. It […]